(By Mark Willacy, ABC, 6 Aug 2014) A leading Asian human rights activist has urged the Federal Government to investigate a Queensland-based resources company and a prominent Australian geologist over mining deals with North Korea that he believes may breach United Nations sanctions.

One of the deals involves the mining of a potential deposit of 216 million tonnes of rare earths, which are minerals used in everyday items including smartphones, flatscreen televisions and computers, but also essential for sophisticated weapons such as guided missiles.

The deposit, discovered at Jongju, about 150 kilometres north-west of the North Korean capital Pyongyang, is reportedly one of the world’s largest.

It could also provide a significant boost to the rogue state’s economy.

Late last year, a British Virgin Islands-based private equity firm, SRE Minerals, signed a joint venture with the regime-run Korea Natural Resources Trading Corporation to develop the site for the next 25 years.

The project’s lead scientist and director of operators is Dr Louis Schurmann, an experienced Brisbane-based geologist and fellow of the Australasian Institute of Mining and Metallurgy.

Tokyo-based Human Rights in Asia director Ken Kato has told the ABC that he wants the joint venture project investigated.

“Rare earths are an indispensable material for guided missiles,” he said.

“North Korea’s mining resources are a major source of revenue for its nuclear and missile programs.”

Activist who questioned deal labelled ‘doomsday prophet’ in email

UN Security Council resolution 2094, passed in response to the regime’s 2013 nuclear weapons test, bans the transfer of any financial or other assets, or resources “that could contribute to the DPRK’s [North Korea’s] nuclear or ballistic missile programs”.

The question remains whether this could in any way apply to rare earths mined in North Korea.

The ABC has obtained correspondence between Mr Kato and Dr Schurmann, in which the activist warns the geologist that the project could be in violation of resolution 2094.

The exploration geologist dismissed the concerns in a reply email.

“Have you ever thought that doomsday prophets like your [sic] cause most of the problems?? What we are doing is making a difference … a POSITIVE one … try it,” Dr Schurmann wrote.

Mr Kato has referred Dr Schurmann to the Sanctions Section of Australia’s Department of Foreign Affairs and Trade, urging an investigation.

The Sanctions Section replied: “Australia takes its sanctions obligations … very seriously and we will provide due consideration to the matters you have raised.”

When Lateline asked the department whether Australians or Australian companies involved in the Jongju mining project were in breach of sanctions, it refused to comment, or to confirm if an investigation was underway.

Rare earths could ‘change the whole game’ for North Korea

North Korea expert Leonid Petrov, from the Australian National University, warned that if the rare earths deposit was as big as being touted, it would provide a huge boost to the country’s economy.

Dr Petrov said such an injection of hard currency into the impoverished and brutal regime would strengthen its chances of survival.

“If they really do have substantial amounts of rare earths in North Korea it can actually change the whole game of survival for North Korea,” he said.

“The regime does not need to reform [with such an injection].”

Mr Schurmann is not the only Australian link to the Jongju rare earths project.

Brisbane-based Salva Resources assessed the deposit for the proponents, and found it to be a considerable and economically viable prospect.

At the time of the company’s involvement, Salva Resources was owned by Brisbane mining executives Lachlan Broadfoot and Grant Moyle.

Last year, in a deal that media reports said had netted them millions of dollars, they sold the company to US engineering group HDR.

Lateline contacted the new company, HDR Salva, seeking comment about the Jongju assessment and an interview with Mr Broadfoot, who works at the merged company.

In a statement, HDR Salva said: “Salva Resources was contracted to do a geological review of historical data. The nature of this work was thus not relevant to your other comments.”

Those “other comments” relate to the ABC’s queries about UN sanctions against North Korea.

Under Security Council Resolution 1718, to which Australia is bound, it is “an offence to engage in conduct which assists, or results in, the sale, supply or transfer of specified goods on the luxury goods list to [North Korea]”.

Number 22 on the prohibited list is “precious metals”, an appellation sometimes given to rare earths.

It is unclear whether resolution 1718 applies to materials mined inside North Korea.

Gold and silver also appear on the list.

Lateline has discovered that Dr Schurmann’s mining interests in North Korea are not just confined to rare earth minerals.

Dr Schurmann is a director of Australian Stock Exchange-listed EHG Corporation, which last year announced it had acquired a sub-licence “to mine, process, extract and sell all minerals from the North Hwanghae province” in the closed communist state.

Those minerals would include gold, silver, lead and copper.

Dealing with North Korea ‘controversial business’

ANU’s Dr Petrov said dealing with North Korea was fraught with dangers.

“The money that goes to North Korea can be used by the regime to suppress its own people or to beef up its nuclear or missile capabilities. So doing business with North Korea is controversial business.

“It’s highly advised if you don’t want to end up on the list of sanctioned people and banned from doing business with other countries, you’d better check the list and check what is prohibited and what it allowed.”

Lateline emailed Dr Schurmann, sent him a Facebook message, called his home phone number, and visited his Brisbane home seeking comment. The program finally made contact. But the geologist told the ABC he has been advised by his lawyers not to comment at this stage.

As well as potential sanctions breaches, questions remain about who Dr Schurmann and his colleagues are dealing with in Pyongyang.

Human rights activist Mr Kato said most of Pyongyang’s biggest money making ventures were run by a secret unit of the regime called “Office 39”.

Mr Kato has told the ABC that while Office 39’s agents were sometimes involved in legitimate ventures, they were also responsible for counterfeiting, drug smuggling and weapons trafficking, he said.

“Office 39 controls most of the mining in North Korea. It’s like a big exclusive conglomerate for the Kim family,” said Mr Kato.

“The US Treasury Department says Office 39 provides capital to North Korea’s leaders and it is subject to sanctions in Australia, the US, and Europe.”